Volkswacht Bodensee - Stocks dip as Powell warns of more 'moderate' rate hikes

Speaking to a Congressional hearing, Powell said that although progress has been made, inflation remains "well above" the Fed's target of two percent.

"Given how far we've come, it may make sense to move rates higher but to do so at a more moderate pace," he said.

The US central bank last week held rates steady after 10 straight increases, but signalled more hikes could come to bring prices under control.

Ahead of his address, Powell said in a written statement that "nearly all" Fed policymakers agreed on the need to "raise interest rates somewhat further by the end of the year."

Investors were equally eager to hear his take on the near global banking crisis in March triggered in the aftermath of the collapse of a number of regional lenders.

While the Dow was marginally higher in late morning deals, both the S&P 500 and Nasdaq Composite were lower..

London and eurozone markets closed lower after data showed UK inflation remained unchanged at 8.7 percent in May.

Markets had expected consumer prices to cool but now fear the Bank of England could go for a bigger rate hike than previously thought at a meeting on Thursday to tame inflation.

"The impact of further monetary tightening on the British economy is likely to hinder economic activity and ultimately cause a contraction," said Ricardo Evangelista, senior analyst at ActivTrades.

British housing builders were also "feeling the heat" from inflation numbers "as concerns about a housing market slowdown gather pace", said Michael Hewson, chief analyst at CMC Markets UK.

Fears that higher rates could do more harm than good for loans and deposits resulted in downgrades at UK banks including Natwest that saw shares falling to their lowest levels since November 2022, according to Hewson.

The anxiety in the United States and Europe follows disappointment across market floors this week with Beijing's tepid moves to try and revive the Chinese economy.

The People's Bank of China reduced its benchmark five-year rate by 10 basis points on Tuesday, less than the 15 points expected.

Uncertainty over the Chinese economy, which continues to show signs of weakness as the post-Covid rebound fades, also weighed on the yuan, which on Wednesday briefly fell past 7.2 per dollar for the first time since November.

"Developments in China... continue to point to a slower-than-predicted post-pandemic recovery in the world's second-largest economy," added Evangelista.

"With China's economy struggling to regain momentum, the headwinds for the global economy get stronger."

The Shanghai stock market closed down 1.3 percent and Hong Kong lost two percent.

- Key figures around 1530 GMT -

New York - Dow: UP 0.07 percent at 34,076.03 points

London - FTSE 100: DOWN 0.1 percent at 7,559.18 (close)

Frankfurt - DAX: DOWN 0.6 percent at 16,033.26 (close)

Paris - CAC 40: DOWN 0.5 percent at 7,260.66 (close)

EURO STOXX 50: DOWN 0.5 percent at 4,322.49 (close)

Tokyo - Nikkei 225: UP 0.6 percent at 33,575.14 (close)

Hong Kong - Hang Seng Index: DOWN 2.0 percent at 19,218.35 (close)

Shanghai - Composite: DOWN 1.3 percent at 3,197.90 (close)

Euro/dollar: UP at $1.0951 from $1.0918 on Tuesday

Pound/dollar: DOWN at $1.2731 from $1.2766

Dollar/yen: UP at 142.01 from 141.40 yen

Euro/pound: UP at 86.00 pence from 85.50 pence

Brent North Sea crude: UP 1.0 percent at $76.88 per barrel

West Texas Intermediate: UP 1.2 percent at $72.41 per barrel

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M.Furrer--BTB